No one likes to profit from tragedy, but the
harsh reality is that it sometimes takes one to kick things
into high gear.
The deadly bridge collapse in Minneapolis,
highlighting the poor condition of much of the nation's
infrastructure, is a prime example, and likely will lead to
increased infrastructure spending-or so one would hope.
This increased spending, in turn, should
benefit the steel industry. Bridge repairs will require steel
plate, light beams and structural shapes; new roads and highway
supports will gobble up concrete reinforcing bar; and more
steel rail will be needed if the nation is to keep up with
increasing demand for mass transportation and rail freight.
But the spending likely won't generate a
precipitous cash windfall, analysts said. Instead, the impact
of any new infrastructure spending will be felt over the next
several years rather than in the next few quarters.
Bridges, for example, can take years to
design and build, Mark Parr, steel industry analyst at Keybanc
Capital Markets LLC, Cleveland, said. "A bridge is an
engineering work of art. Every one is different. Each project
is unique. We're talking 2009, 2010. It's not like putting up a
new Wal-Mart or a Banana Republic."
And the nation needs a lot more than
patched-up bridges, he said. "It's probably fair to say that
the spending that has been going on has not been keeping up
with normal wear and tear and increasing traffic loads. A
reasonable expectation is that this market will be no worse
than stable and probably a solid growth market for the
With the transportation bill signed into law
in 2005, the federal government allocated $286.4 billion over
six years for infrastructure upgrades and repairs. Even if no
new spending were authorized, existing funds are likely to be
allocated more quickly because of the Minneapolis tragedy, Tony
Taccone, a partner at Pittsburgh-based First River Consulting,
said. "It's going to be spread over a long period. This may
slightly accelerate the curve, but I think generally it's not
going to have a huge impact."
Most agree with Taccone's cautious
"You've got big headlines, which have got the
attention of the White House. And people are out inspecting
bridges right now. But it won't be a gold rush," said Scott
Burns, a metals and mining equity analyst at Morningstar Inc.,
However, that doesn't mean infrastructure
spending won't have some clear benefits for the steel industry,
Burns said. The residential construction market is in bad shape
and many expect commercial construction to flatten or soften in
coming months, he noted, so any new infrastructure spending
could help steel companies hedge against declines in other
But some question whether the bridge collapse
and resulting media frenzy will have any lasting effect on
"I think they'll forget about it in a month,"
Charles Bradford, president of Bradford Research/Soleil
Securities Inc., New York, said. "And it's too bad, because we
need very, very major infrastructure rebuilding, and the steel
companies would be major beneficiaries of that."